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Shell white-washing $77bn carbon risk

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Royal Dutch Shell has been accused of underestimating the carbon risk to investors on tens of billions of high cost oil projects, despite the global oil major’s recent claims to contrary.

The Carbon Tracker Initiative (CTI) and Energy Transition Advisors (ETA) have released a report warning that up to $77 billion-worth of the company’s new fossil fuel projects will be stranded as climate change policies begin to bite.

The report also highlights the risk of lower economic growth and technological advances hitting oil prices and making future projects unviable – a scenario it says Shell neglects to address.

“Shell’s approach is based on dismissing potentially weaker demand for its oil due to tougher climate policies, technological advances and slower economic growth,” say CTI and ETA in a media statement.

“Investors and financial regulators need to ensure that scarce pension fund monies will not be lost in moth-balled projects,” the statement says.

The report comes in response to an open letter by published by Shell in May to address shareholder concerns on the issue of stranded fossil fuel assets.

In the letter, Shell dismissed the possibility that its proven oil or gas reserves would become unusable as a result of climate change regulation, saying fossil fuels would continue to play a key role in global energy to 2050 and beyond.

Perhaps following the Australian Abbott government’s lead, Shell is accused of dismissing the likelihood of political action on climate change, “ignoring the growing list of national and regional emissions measures being legislated and the growing calls and potential for greater energy efficiency worldwide.”

According to the two think tanks, Shell’s conclusions rest on the following syllogism: over the coming decades the world will continue to consume fossil fuels; therefore fossil fuels will be produced; therefore existing fossil fuel reserves (or at least Shell’s reserves) will not be “stranded.”– Again, sounds familiar.

But as the groups point out, even producing reserves may still destroy value for shareholders.

“Ultimately, as analysts we believe that such destruction of shareholder value is the key risk implied by the term “stranded assets.” Even more important is the potential for resources to become low-return assets through future capital expenditures,” they write.

And while Shell acknowledges the need for urgent action on climate change, it also states in its letter that the world will fail to meet the internationally agreed global warming target of 2°C – a classic (and again, familiar) example of Orwellian double-think, says to CTI CEO, Anthony Hobley.

“Acknowledging the seriousness of the climate challenge whilst at the same time asserting no effective action will be taken until the end of the century is as classic a case of Orwellian double think as you are likely to find,” Hobley said on Wednesday.

“With this combative stance, Shell has missed an opportunity to explain to its shareholders how its capital expenditure plans are resilient to the impending energy transition.”  

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  • Keith

    Hopefully companies encouraging a descent into chaos by continuing to ignore the science will soon find themselves outed and shamed as they should be. We are close to calling this callous disregard for the future of humanity.

    • suthnsun

      Only close Keith? Criminal neglect and class actions are close I imagine.

  • Colin Nicholson

    Given the Ken Saro-Wiwa murder, nothing about Shell is too surprising

  • Alen

    These traditional industries are so locked into their old ways that even when bankruptcy knocks on their door they’ll still claim the market will pick up again and all will be well.

  • Pedro

    Shell and BP used to make solar panels and were significant at the time with a good reputation for quality PV product. How things could have been so different if only they had chosen to back this technology seriously 10 or so years ago. Couple that with their expertise in heavy engineering and off shore rigs these companies could have jumped on the off shore wind turbine bandwagon. A massive missed opportunity.

  • Miles Harding

    Shall has been in bare-faced denial of the future for a long time. Those “lets go” propaganda ads that run in the likes of New Scientist are really annoying.

    Has anybody seen the Steven Kopits talk at Columbia University, earlier this year?

    It would appear that Shell and BP are rapidly heading to oblivion because exploration costs are eating all of their profits. They appear to have little choice other than burning the furniture by selling their best assets in order to pay dividends to the pension fund shareholders.